Somali Piracy Business Model and the ‘Costs’

was last modified: May 21st, 2013 by Price Western

Original source: Op Ocean Shield (via Facebook)

The Somali piracy business model hinges on the ability to securely anchor hijacked ships along Somalia’s coastline during negotiations for the release of cargo and crew, says Commander of the NATO’s Counter Piracy Task Force 508, Operation Ocean Shield.

Business Model

The heart of a pirate operation is the land rather than at sea, according to Italian Rear Admiral Natale. The availability of secure anchorages for hijacked vessels depends on the pirates being able to induce, or coerce, local stakeholders into condoning their activities. In any given location, local power dynamics are instrumental in explaining the emergence of piracy. The image (below) demonstrates the anchroages, virtual safe havens, used by Somali pirates

Human, Economic, and Global Security Costs

The scale, geographic scope and violence of Somali piracy operations have created public concern throughout the world. As many as 3741 crew members of 125 nationalities have fallen prey to these pirates, with detention periods as long as 1178 days. Reportedly,82 to 97 seafarers have died either during the attacks, in detention after poor treatment, or during rescue operations.

Beyond the human tragedy, although certain in part because of it, Somali piracy has imposed significant global costs, particularly on nearby economies. Increased insurance premiums, expenditures for on-board security measures, and rerouting or cancellation of shipments are among the many channels through which pirates have affected the world economy. To evaluate the global costs, reporting analyzes changes in world trade patterns that coincided with, and might be explained by, the onset of Somali piracy. Compared to pairs of countries that trade through other sea routes, all other things being equal, trading partners for which the shorter shipping route goes through the Arabian Sea, saw a drop of 7.4 percent in value of their yearly trade – the same effect as would result from imposing an additional 1.1 percent ad valorem tax on all shipments through the zone where the Somali pirates operate.